The origins of the Internet date back to the 1960s when the US government began research into computer networks. The subsequent development of interconnected networks first allowed researchers to share information, but by the 1990s the commercial potential of the technology had become evident.
The Internet gained mass market appeal in the mid-1990s and usage of it has grown exponentially ever since. More than one-third of the global population now accesses the Internet and the figure continues to rise, creating new operational challenges and unprecedented growth opportunities for retailers.
The Internet offers shoppers unprecedented access to information, the ability to consume, share and create content and engage in commerce like never before. Presented with this collection of amazing capabilities, the Internet quickly gained popularity. The introduction of devices which allow for mobile access made the Internet an indispensable part of daily life and transformed the retail industry in the process.
Amazon
It is a phenomenon best exemplified by Amazon.com. Founded in 1995, Amazon.com’s initial focus on books and music soon expanded to include other categories and new geographies. The company was the first to recognize and harness the power of user-generated content in the form of product reviews. Shoppers loved reading others’ reviews and contributing their own. This unique attribute and Amazon.com’s site functionality, commitment to supply chain logistics and customer service, were a potent combination.
As assortments were expanded and more product reviews followed, Amazon began to rival Google as a place where shoppers began their search for products. Traffic to the company’s website now routinely exceeds 100 million unique monthly visitors. Annual sales last year increased 31 percent to slightly more than $177 billion and more growth is expected as the company executes a vision of being the world’s most customer-centric company and a place where shoppers can buy virtually anything at the lowest possible price.
While Amazon.com was busy leveraging the Internet to help shoppers buy, eBay was focused on the sell side of the commerce equation.
The company launched its online auction platform in 1995 and quickly gained favor with sellers and buyers. The auction approach evolved into something much more significant and soon encompassed all aspects of commerce. Many users sold directly, foregoing the auction process entirely, to establish digital storefronts, in essence making eBay the equivalent of the world’s largest online mall. The company enables users to buy and sell in nearly every country and through its PayPal subsidiary it facilitates the ability to securely send and receive payments.
Today, eBay is the second most heavily trafficked e-commerce site on the Internet and generates annual revenues of slightly more than $14 billion.
The likes of eBay, Amazon and other online-only retailers were at one point regarded as a death knell for traditional brick and mortar chains, especially those who offered categories that were well-suited to online purchasing. However, retailers such as Walmart, Tesco, Costco and Macy’s recognized their physical stores were not the liability some believed them to be during the Internet’s heady early years. Faced with a new breed of competitor and shopper expectations that were being elevated higher and faster than ever before, conventional retailers adopted a blended approach to serving shoppers that came to be known as ‘multichannel retailing’.
In Walmart’s case, it recognized its physical store base which exceeds 6,200 units in the US alone could be used as miniature fulfilment centers. The company acquired e-commerce capabilities domestically and internationally and created a global e-commerce group charged with transforming the Internet into a new growth engine for the company. As things stand now, Walmart.com is the third most frequently visited retail site on the Internet and routinely averages more than 127 million unique visitors each month. Its online sales total roughly $11.5 billion, a fraction of total revenues of nearly $500 billion.
However, as Walmart and other conventional retailers have discovered, one of the realities of an increasingly multichannel world is that attributing a sale to a store, a website or a mobile device is irrelevant. Shoppers don’t care how a retailer accounts for the sale – only that all platforms and points of interaction with the retailer are highly integrated so as to provide a seamless experience with the brand.
Contribution to Retail History
The Internet’s contribution to retail history is impossible to overstate and far from complete. In roughly 15 years, the Internet spawned disruptive companies such as Amazon, eBay, Google, Facebook, Twitter and Alibaba. The growth the Internet allowed these companies to achieve changed everything retailers thought they knew about retail. From the sourcing and development of merchandise, to marketing communications, store operations and supply chain logistics, retailers were forced to cope with an unprecedented pace of change.
Retailers’ boardroom conversations were dominated by discussions of e-commerce, multichannel integration and how to serve customers’ rapidly advancing expectations. Traditional retailers were forced to adjust to new marketplace dynamics created by online only retailers who were gaining market share at an alarming pace, while conventional retailers were shifting to an integrated model that leveraged physical assets and the trust of well-established brand identities.
The Internet’s contribution to retail history remains a work in progress as innovative companies seem to reinvent the future daily. However, an enduring contribution promises to be one of consumer empowerment and access to limitless possibilities. That is the new expectation of shoppers in the digital age and the competitive climate in which retailers now operate thanks to behaviors, communications and lifestyle choices that didn’t exist a generation ago. For many people, anytime, anywhere access to the Internet and the ability to purchase a limitless assortment of products is now taken for granted in much the same way as electricity, indoor plumbing and air travel.